Victoria state Chief Health Officer Rosemary Lester said that vulnerable residents were advised to leave the town of Morwell as a precaution because the fire in the nearby mine was expected to spew smoke. Photo: AP

On February 9, the Hazelwood brown-coal mine found its ignition. Started by human hand, a grassfire roared down the Princes Highway sending embers spilling into the mine chasm. For 29 days coal seams in disused parts of the mine have burnt and smoke has covered the nearby town of Morwell.

For residents life has been ''uncomfortable'', as Premier Denis Napthine described it, their lungs filling daily with smoke and particles.

But as recriminations about health impacts grow, a perhaps more significant debate is playing out about the future of Victoria's 90-year old brown-coal industry. For decades environmentalists have pointed to the large amounts of greenhouse gas - which are dangerously warming the planet - emitted from brown coal when it is burnt. Even when compared with black coal, the younger brown variety is much more polluting.

They say that problem, coupled with health implications for nearby residents currently illustrated in Morwell, mean Victoria's ageing brown-coal mines and power plants should close. In their place should be more clean energy in a more dispersed electricity system.

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Ask the state government about abandoning brown coal and the answer is a firm no. On Monday, Treasurer Michael O'Brien sent out a tweet hinting at the background battle over the future of Victoria's energy industry playing out amid the Hazelwood haze: ''Extreme greens using a deliberately lit fire to push their left-wing agenda is pretty much the textbook definition of appalling.''

Deputy Premier Peter Ryan holds similar views. He told Fairfax Media: ''For them to do it on the back of the recent events and the difficulties faced by the people of Morwell … I think that's a miserable thing to do.''

Firefighters on land and in a helicopter battle fire burning at the Hazelwood Coal Mine at Morwell, Australia. Photo: AP

If the fire has given the Napthine government pause for thought about brown coal's future, it doesn't show publicly. Instead it is eyeing off an expanded industry. It wants to make new allocations of Latrobe Valley brown coal, hoping an export industry will emerge. And it is soon to announce $80 million in project grants to process the resource in new ways.

It is a remarkable turnaround for brown coal's prospects. Not long ago Labor governments, both state and federal, had plans to pay a Latrobe Valley generator to shut down. Carbon pricing was to make the cost of producing power with brown coal prohibitively expensive in coming decades. Incentives to install renewables were in place.

Now most of those plans have been axed, are on the chopping block, or under review. And with Victoria's historic manufacturing base in decline, a vision of an expanded brown-coal industry - and the royalties it brings - may be too tempting for the Napthine government to pass up.

Latrobe Valley brown coal started life about 30 million years ago as lush forests in the Gippsland basin. Trunks, branches, leaves, stems, bark, seeds, spores and resin fell to the bottom of swamps, accumulated and decomposed, turning into peat. As the swamps subsided, then dried out, the peat was covered in sediment and rock formed. That pressurised and buried the peat, squeezing the water out of it and heating it up. Coal was created.

But as coal goes, the brown variety is young. It is softer and wetter than regular black coal, which is typically 100 million years old or older. That means it is not exported. Instead it is dug up and burnt for power next to the mine.

The first tracts of Victorian brown coal were found and used in the 1850s. But not until the early 1900s did full surveys of the state's coal deposits begin; 435 billion tonnes have been found.

The Latrobe Valley, whose earth holds 65 billion tonnes of coal, was deemed best suited for large-scale mining because the seams were thick and close to the surface. In 1924 the first power was produced and fed into Melbourne, and in the decades since the cheap cost of brown-coal electricity gave Victoria industrial clout, powering car, steel and aluminum plants.

Since then plants closed; others were built. A national electricity grid was constructed. And the industry was privatised. But brown coal is still king, today generating about 90 per cent of Victoria's electricity.

At the same time the science of climate change has become abundantly clear. The planet is warming, predominantly due to human-induced emissions from fossil fuels. That is dangerously changing weather patterns. More extremes are occurring - droughts, fires and heatwaves - and they will get worse if global emissions do not stop.

Several international bodies, including the International Energy Agency, now warn that to keep global warming to relatively safe levels, most proven global fossil-fuel reserves will have to remain in the ground.

Victoria's six brown-coal generators are no small contributors to the greenhouse problem. They emit 60 million tonnes of carbon dioxide a year. And they release more CO2 per unit of electricity than Australia's black-coal, gas or renewable power stations.

Professor Frank Larkins, emeritus professor in chemistry at Melbourne University and the state government's chief energy scientist, says despite this he believes Victoria is sitting on a resource that can still be developed. The key to unlocking it, he believes, while not harming the planet, is carbon capture and storage. That technology captures and removes the CO2 created when coal is burnt or processed. Instead of being released into the atmosphere the CO2 is piped and stored underground in porous rock. Without it, Larkins says, brown coal is unlikely to have a long-term future.

There has been much enthusiasm for carbon capture and storage in the past. But high-profile project collapses and slow progress in proving it works on a commercial scale has taken the shine off.

Barry Hooper, an adviser to the CO2 Co-operative Research Centre, says the Gippsland basin in Bass Strait contains some of the best CO2 storage potential in the world. A bullish Hooper says if the policy incentives are right then the first carbon dioxide from Latrobe Valley power plants could be stored in Bass Strait by 2020 or 2025. A state government project, CarbonNet, is at present investigating the feasibility of a large-scale carbon storage project in Victoria.

Larkins' enthusiasm for carbon capture and storage matches his scepticism that renewables can soon replace brown coal in Victoria altogether. He says the advantage of coal is that it is a secure fuel source. Sun and wind - while they should be part of the mix - only intermittently produce power. Technologies to store renewable energy for times of high demand are not mature enough, he says. And while gas is an option, prices and supplies are volatile.

''The real crunch with coal as we all know is carbon dioxide. You ask whether brown coal has a long-term future? It does, but only if we can prove sufficient [carbon dioxide] storage,'' he says.

While capture and storage still has hurdles to clear, the Napthine government is pushing on with development. And its plans are broader than power generation. It wants to encourage the processing of brown coal for export or to turn it into products such as oils and fertilisers. To do this grants are in the wings and a new allocation of coal is being considered.

Ryan says the government is talking to potential buyers and has met with several companies from Australia and Asia. He says this will determine the commercial interest in Victorian brown coal and answer the ultimate question of just how attractive a resource it actually is.

''We have a supply of what is said to be about 400 years-plus of brown coal,'' Ryan says. ''As to what might be the technological developments in the coming decades, who knows? But even in the face of that, the coal resource will be for many decades a fundamental product sought not only within Victoria and Australia, but in international markets with a focus on China, India and Asia.''

Ryan says that, unlike under the 2002 allocations by the Bracks government, potential customers are not required to bring new technologies for processing brown coal to the table. But, as the raw product needs to be treated before export, those technologies will be part of any project as a commercial reality and will deal with the environmental concerns, which he says he shares.

But if brown coal is one day to be exported, a lot of new infrastructure will need to be built. A 2012 study by industry group Gippsland Regional Infrastructure Development found that expensive new port, rail and road capacity would be needed. Ryan says proponents are being told government will not foot the bill.

The study says the first 2 million tonnes could be exported via the Geelong or Melbourne ports, suggesting coal could one day travel through Melbourne suburbs on train or truck. But if production grew larger an expanded Port of Hastings, or a new dock at Port Anthony or McGaurans Beach will be required.

There is also healthy scepticism about the claims of proponents of new brown-coal industries. Many of the technologies to turn brown coal into other products are in early development stages, unproven and remain greenhouse gas intensive. Past efforts to develop more brown coal for anything but traditional power generation have so far delivered little.

Mark Wakeham, acting chief executive for Environment Victoria, says proponents of new brown-coal industries have come and gone for years, always promising much and delivering little.

Wakeham's preferred vision is instead to encourage more renewable energy and to drive harder on saving power. That would allow for the phase out of brown coal, with most of the current power plants being closed down in a decade or so, and create jobs in green industries.

Many technical experts say energy market conditions have also now emerged that make baseload brown-coal power less attractive than it once was, even beyond the climate concerns. Professor Mike Sandiford, director of the Melbourne Energy Institute, says while coal will likely be the energy system's backbone for the next two decades the time to start breaking old habits is now.

That is because demand for electricity is falling, driven by energy efficiency efforts and the closure of major manufacturing plants. Sandiford says the decline in demand is changing the economics of the electricity market. Where once the cost of generation was the main concern, now transmitting electricity from big power plants is the biggest cost burden. That makes cleaner, more nimble and dispersed sources of power generation increasingly more attractive than the great big brown-coal plants that need to be run all the time to make money.

From this Sandiford says it is clear a more ''distributive system'' of electricity will emerge. That means many, smaller sources of power - solar panel arrays, small gas-fuelled generators - will be spread widely feeding electricity into the grid and powering clumps of homes and offices around them.

And Sandiford says there are many more gains in energy efficiency to be made, further reducing how much electricity this system will need to generate. All this means much less baseload power, and much less brown-coal use, if any at all.

Alan Pears, senior lecturer in sustainable energy at RMIT, agrees and is perhaps more bullish about the decline of coal and baseload under a flexible and interactive electricity system. And he says if needed there are renewable energy technologies that can act as baseload-like power sources, such as bioenergy, to replace brown coal as electricity demand is better managed and more energy savings are made. He says the upfront costs of carbon capture and storage will make it too prohibitive to compete in a more distributed energy system.

He concedes that energy-storage technology - such as batteries and pumped hydro - has lagged, but that too is changing. Depending on technology and the direction of government policy he expects Victoria's brown-coal generators to close between 2020 and 2040 and not be replaced.

Meanwhile polling suggests views on brown coal are mixed among Latrobe Valley's residents. Even with the Hazelwood fire burning, a phone survey of 1660 Latrobe Valley residents by Lonergan Research taken last week found 44 per cent wanted mining to remain at current rates, 24 per cent wanted it to decrease, while 10 per cent favoured a total phase out. Fifteen per cent wanted mining to expand.

Asked to consider whether coal mining's economic benefits outweighed its potential effects on environment, health and other industries, Valley residents were again divided. Thirty-four per cent said the benefit outweighed the costs, 34 per cent said they did not, and 32 per cent were unsure.

Despite the mixed views, Larkins is ultimately optimistic that developing brown coal into new products can benefit the state. He says the fire is regrettable and serious, and a risk of mining. But it is a short-term issue and no argument not to develop new industries that can create jobs and wealth. But he says they should only be pursued with carbon capture and storage and only if the new coal products are internationally competitive.

''A fact of life is any government is motivated for Victorian citizens, and to create wealth for Victorians,'' he says.

''And the big question is, where are the jobs going to come from? Where are you going to create the wealth? I keep coming back to the fact we have one of the largest deposits of brown coal in the world and we have the capacity to generate both jobs and wealth if we use it in a sustainable way.''

Wakeham says the government should instead encourage jobs in clean energy. He says there is a fetishism about jobs ''that require hard hats'' and while coal employs about 1600 people in Victoria, there are at present about 4500 jobs in installing solar panels that are ''just as real''.

Pears also remains unpersuaded that developing other products from brown coal is viable. He says the projects will struggle to find the finance to build at scale and support the export infrastructure. Conflicts over land use in the Latrobe Valley between mining, agriculture and tourism have also been building. And without carbon capture and storage, the projects will be too emissions intensive to justify.

And in the power sector he says the big generators are now outdated. The real problem, he says, is that governments are protecting the incumbent brown-coal players from other technologies that are ready to supersede them.

''As one oil sheikh said, the Stone Age didn't finish because we ran out of stones,'' he says.